Fiduciary Oversight: Timely Topics for Employee Benefit Plan Sponsors

Fiduciary Oversight:Timely Topics for Employee

Benefit Plan SponsorsCharles BruderScott Rappoport

Kriste Naples-DeAngelo

The material provided herein is for informational purposes only and is not intended as legal advice or

counsel.

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Please help yourself to food and drinksPlease let us know if the room temperature is too hot or coldBathrooms are located past the reception desk on the rightPlease turn OFF your cell phonesPlease complete and return surveys at the end of the seminar

Fiduciary Oversight Under ERISA

Presented By: Scott Rappoport

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Fiduciary Oversight In The Spotlight

ERISA litigation up 25%/year (past 4 years) LaRue v. DeWolff (Supreme Court 10/2007) Financial Market Turmoil Pension Protection Act (2006)/DOL disclosure

initiatives (2008)

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Who is a Fiduciary?

Any person who:

Exercises any discretionary authority or discretionary control in managing the plan or who has any authority or control in managing or disposing of its assets;

Has any discretionary authority or responsibility in administrating the plan.

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Responsibilities of a Fiduciary Under ERISA

Fiduciaries are required to perform their duties solely in the interest of the plan participants and their beneficiaries.

Fiduciaries must exercise the care, skill, prudence, and the diligence of a prudent person who is acting in a like capacity and is familiar with such matters.

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What are Fiduciaries’ exposures under ERISA?

Fiduciary liability is personal, absolute and unlimited. ERISA

holds fiduciaries personally liable for their actions

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Safe Harbors

Voluntary

May insulate from liability

Excellent to take advantage of

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404(a) Safe Harbor Provisions-Delegating to Investment Counsel

Investment decision delegated to “prudent expert” Experts selected by due diligence process Experts exercise discretion over assets Expert acknowledges co-fiduciary status in writing Fiduciary must ensure that experts perform the

agreed upon tasks using agreed upon criteria

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Fiduciary Adviser Safe Harbor Provisions

Select a qualified fiduciary adviser who:

Acknowledges fiduciary status in writing

Discloses all conflicts of interest Discloses all forms of compensation

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404(c) Safe Harbor Provisions-Participant Education & Communications

Requires notification in writing of intent to comply with 404(c) safe harbor

Three different investment options with differing risk/return profiles

Information and education on the different investment options

Opportunity to change investments with appropriate frequency

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Qualified Default Investment Alternative (QDIA)

Plan sponsor can avoid liability for participant investment decisions by offering QDIA

Age-based funds or models Risk-based funds or models Age-based managed accounts Money market accounts for 90-120 days

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Fiduciary Oversight Benefit Sources & Solutions Best Practices

Creation of the Investment Policy Statement/Governing Body Document

Creation of the Investment Committee Designation of qualified professional investment

counsel Ongoing monitoring & reporting

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Monitoring & ReportingBenefit Sources & Solutions Best Practices

Review actual Portfolio for MPT Statistics Appropriate Index Peer group

Compare investment expenses for risk & reward Create a quarterly correlation matrix Review operational quality of investment managers Disclose plan expenses and revenue sharing Create “plain English” quarterly “minutes” for plan

sponsor tied to an annual IPS review Standards defined in the IPS

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Monitoring & Reporting

Investment Committee Meeting Minutes

Information that is provided must be evaluated andactions that are considered must be documented

Watch list procedures must be followed

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The Profit Sharing/401k Council of America’s First 403(b) Benchmarking Survey

385 Not-for-profit respondents

41% of respondents are making changes due to new Treasury Regulations

Benchmarking data is crucial to running your program “ How can you manage what you can’t measure?”

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Plan Agreement Types

25.2% have an Annuity Group Custodial Agreement (GCA)

19.5% have Non-Annuity GCA

Balance have Individual Custodial Agreements

The larger the plan, the more like they are to utilize a Non-Annuity Custodial Agreement

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Employer Contribution

89.4% of employers contribute to the plan

41.1% provide a stated match percentage

13.8% provide a guaranteed percentage of participants’ pay

Most common (45.4%) match formula is dollar for dollar

On the first 3% of pay 15.3%

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Other Statistics Average participation rate is 75.8%

50-199 participants 81% 1000+ 63.4%

10.9% offer Roth, 8.9% make Roth contributions when offered

Average funds offered is 21

46.3% have an investment policy statement, 34.2% unsure if they have

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How Can Benefit Sources & Solutions Help

Fiduciary Review Checklist Mutual Fund Review Benchmarking Source of technical information 888-560-5171

Copyright © 2009 United Benefit Advisors, LLC. All Rights Reserved.

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2009 UBAHealth Plan Survey

23 Copyright © 2009 United Benefit Advisors, LLC. All Rights Reserved. 23

Employees Waiving Medical Coverageand Waiver Bonus

18.4%

2.8%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

% Waiving Coverage % Offering Waiver Bonus

$119

$143

$0

$20

$40

$60

$80

$100

$120

$140

$160

Avg. Monthly SingleBonus

Avg. Monthly FamilyBonus


Annual Cost Per Employee - Total Cost

$7,925

$7,085

$8,462

$6,906

$7,642

$9,907

$7,646

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

PPO HMO POS CDHP EPO FFS ALL


6.7%

12.0%

18.7%

13.8%

1.3%

7.3%

13.0%

7.3%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Initial Offer - Last Plan Anniversary Final Change - Last Plan Anniversary

Changes to Total Premiums

25th Percentile Median 75th Percentile Average


$54

$90

$140$105

$231

$367

$546

$419

$0

$100

$200

$300

$400

$500

$600

Single Family

Monthly Employee Share - Dollar Amount



$0 Employee Contribution and Percent with Dependent Coverage

29.4%

8.5%

52.7%

0%

10%

20%

30%

40%

50%

60%

No Single ContributionRequired

No Family ContributionRequired

% of Employees withDependent Coverage

Copyright © 2009 United Benefit Advisors, LLC. All Rights Reserved.

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Basic Plan Design ComponentsCoPays, Deductibles, Coinsurance and Out-of-Pocket Maximums


$20$30

$40

$100

$300

$0

$50

$100

$150

$200

$250

$300

$350

PCP SCP Urgent Care Center Emergency Room Per Admission CoPayor Ded.

Median CoPays


$500 $500

$1,000

$709

$1,000

$1,240

$2,000

$1,716

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

Single Family

In-Network Employee Deductibles



$1,000

$2,000

$3,000$2,545

$2,000

$4,000

$7,500

$5,836

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

Single Family

Out-of-Network Employee Deductibles



11.1%

30.9%

4.9%

56.9%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

% Offering WellnessProgram

Cash to Premium, 401(k),FSA, etc.

Extra Paid Time Off Gift Certificates or HealthClub Dues

Incentives Included

Wellness Programs and Incentives


Wellness Programs & Components

78.4%

39.7%

47.1%

41.8%

56.9%

11.3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Health RiskAssessment

Seminars /Workshops

Physical Exam orBlood Draw

Coaching Incentives /Rewards

Other


HRA And HSA Plans

HRAs HSAs

6.0%8.0%

68.7%

0%

10%

20%

30%

40%

50%

60%

70%

% Offered % Enrolled % With FirstDollar Preventive

11.2%7.5%

87.6%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

% Offered % Enrolled % With FirstDollar Preventive


Rx Tier Prevalence

2.2%

12.5%

71.7%

13.6%

0%

10%

20%

30%

40%

50%

60%

70%

80%

One-Tier Plans Two-Tier Plans Three-Tier Plans Four-Tier Plans


$10

$30

$10

$30

$50

$10

$30

$50

$75

$0

$10

$20

$30

$40

$50

$60

$70

$80

2 Tier Plan 3 Tier Plan 4 Tier Plan

Median Rx Retail CoPays by Plan Design

1st Tier 2nd Tier 3rd Tier 4th Tier


Separate Prescription Drug Deductible

Plans with Separate Rx Deductible

9.3%

90.7%

With Separate Rx Deductible

Without Separate Rx Deductible

$150

$250

$0

$50

$100

$150

$200

$250

Single Family

Median Rx Deductible

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PRESENTED BY:KRISTE NAPLES-DEANGELO, CPA, MBAPARTNER-PENSION SERVICE GROUP

Plan Sponsor/Management Responsibilities

Plan Governance and Fiduciary Monitoring

Best Practices and How to Avoid the Most Common Errors in Your Employee Benefit Plan

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Who is a Plan Fiduciary? Employer/Plan Sponsor is the ultimate plan

fiduciary Many fiduciaries are named in the plan or

policies of the plan• Trustee(s)• Investment Managers• Plan Administrator – (not TPA) may be an

individual, the employer or subsidiary

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Who is a Plan Fiduciary (continued)?

Corporate Officers – may be fiduciaries by virtue of their office and with respect to decisions surrounding the plan

Selection of service providers Design of the plan benefits Hiring of investment managers Selection of funds

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Who is a Plan Fiduciary (continued)?

Board of Directors – They generally appoint the Retirement/Investment Committee members or corporate officers who are responsible for decisions 2509.75-8 D-4 “the board of directors may be responsible for

selection or retention of plan fiduciaries. If so, they exercise “discretionary authority or discretionary control and are therefore fiduciaries of the plan. However, their responsibility and consequently liability is limited to such.

Retirement/Investment Committee – To the extent that they exercise discretion over the plan

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Who is NOT a fiduciary?

Professional services if they offer:

• Legal Services• Accounting or Auditing Services• Recordkeeping, third-party administrators

or actuarial services

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Fiduciary Duties

Exclusive Benefit Rule – to operate the plan for the exclusive benefit of plan participants and their beneficiaries

Prudent Man Rule (ERISA 404(a)(1)(B))- with care, skill, prudence and diligence

Operate the plan according to the terms of the plan Operating outside the governing terms can result in

disqualification of the plan and breech of duty. Diversified and appropriate investments – to manage the

risk of loss of the investments Reasonable plan expenses

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Plan Governance – What to do?

Fiduciary Standards – Have not changed, they are just more magnified!

What to do? Have a Plan Governance Committee Have Committee meetings regularly

• In light of the economy, have them more regularly Keep written minutes

• Document EVERYTHING!• Establish clear policies and procedures

Create and follow the Investment Policy Statement• Make sure that it is addressed on a regular basis and

documented

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Plan Governance – What to do?

Communicate with and educate plan participants Transparency with regard to fees Provide adequate investment information to enable proper

decisions by participants Consult experts

Due to the prudence requirements, fiduciaries must seek experts with the required knowledge necessary

Consider an ERISA attorney relationship The fiduciary has a duty to prudently select and monitor

these experts in their process Bottom Line – Critical to have an effective process to

identify and manage risk

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Plan Sponsor Responsibilities

Fiduciaries that don’t follow basic standards May be personally liable to restore losses to the Plan May be liable to restore any profits made as a result of

improper use of Plan assets Responsibilities include Plan administrative functions:

Maintaining books and records Filing complete and accurate Form 5500 Establish safeguards to ensure that fiduciary

responsibilities are met One way this can be accomplished is by implementing

internal controls over financial reporting

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Internal Controls Over Financial Reporting

Value of Internal Controls protect your plan in 2 Ways:

1) By minimizing opportunities for unintentional errors or intentional fraud that may harm the plan• Preventative Controls help accomplish this objective which

are designed to discourage errors or fraud

2) By discovering small errors before they become big problems

• Detective Controls help accomplish this objective by identifying the error or fraud after it occurs

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Your Plan’s policies, procedures and organization design are all part of the internal control process

The following are some general characteristics: Procedures that provide for segregation of duties Qualified personnel to perform their assigned duties Sound policies and procedures to be followed by

personnel when performing their duties and responsibilities

A system that ensures proper authorization and proper recording of financial transactions.

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Internal Controls will vary depending on the Plan’s size, type and complexity

Use a risk oriented approach Ensure that high risk areas have adequate controls Ensure that low risk areas do not have excessive controls

Before making a decision to adopt a control consider the cost Consider the potential benefit the control will provide Consider the possible consequence of not implementing

it.

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Determine Your Plan’s Control Objectives 1st step is establishing controls over financial reporting to

determine the objective or what you want to achieve: reliable financial statements that are prepared in accordance with generally accepted accounting principles.

Controls should be designed to address financial statement assertions in the various components of the Plan’s financial statements

Assertions can be classified into 5 broad categories:• Existence or occurrence, Completeness, Rights and

Obligations, Valuation or allocation, Presentation and disclosure

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Existence or occurrence – Do assets and liabilities actually exist at a given date? Did recorded transactions occur during the current year or did they take place in the prior year or subsequent year?

Completeness - Are all transactions that should be presented in the financial statements actually there?

Rights and Obligations - Do the assets and liabilities reported in the financial statements appropriately reflect the rights and obligations of the Plan as of the date of the Statement of Net Assets Available for Benefits?

Valuation or allocation - Are assets and liabilities valued properly?

Presentation and disclosure - Are transactions recorded in proper accounts and is each component properly classified/disclosed?

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Internal Controls

Control Objectives related to the Plan’s financial statements assertions should cover each of the following areas:

• Investments• Contributions• Benefits (distributions)• Participant data• Plan obligations• Participant loans• Administrative Expenses

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Monitoring Controls

Monitoring your controls is critical! Monitoring should be designed to identify and correct

weaknesses in internal control before they can result in a significant misstatement in your plan’s financial statements

You should periodically review the design and operation of your plan’s controls, and make changes where they are not providing the desired result.

It is important to keep in mind that your auditor, under professional standards, cannot be part of your plan’s internal control.

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Example of Selected Controls Employee Benefit Plans

Contributions Amount of contributions by employers and participants

meet authorized or required amounts• Contribution requirements or limitations are described in Plan

document or collective bargaining agreement• Contributions are determined using correct eligibility lists• Actuary is used to perform periodic valuation reports

Contributions are recorded at the appropriate amount and in the appropriate period on a timely basis

• Employer payroll records are compared with contribution calculations

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(Continued)-Contributions are recorded at the appropriate amount and in the appropriate period on a timely basis • Initial controls are established over contribution records for both

participant and employer contributions (salary reduction amounts, after tax and rollovers)

• Clerical accuracy of contribution form is checked Participant Data

• Participant forms (enrollment, transfers, investment allocations etc.) are controlled and are maintained for future reference

• The number of plan participants is reconciled using enrollment forms

• Participant data entries are updated and reconciled to employers personnel and payroll records

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(Continued) Participant Data Participant eligibility is determined in accordance with

the plan document Access to participant data is controlled to prevent

unauthorized changes or additions Investments- Plan Management is held responsible

for investment valuations and financial statement disclosures! Even where there are outside investment custodians, asset or fund managers, or other service providers to assist in determining the value of investments on a plan’s financial statements and Form 5500, the DOL holds plan management responsible. This responsibility cannot be outsourced to a 3rd party.

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Investments Transactions are recorded in the appropriate periods on a

timely basis• Control totals per participant records are compared to

control totals from the trust statements on a regular basis

• Purchases and sales (as a result of contributions and distributions) of mutual funds are reviewed to determine that the net asset value agrees to published quotes

• Purchases and sales are reviewed to determine that the appropriate fair value are utilized

• Understand valuation methodology and the services that the custodian will provide

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Common Errors Noted During A Plan Audit

Improper application of definition of compensation resulting in incorrect deferrals and employer match

Improper application of plan’s eligibility provisions

Improper use of forfeitures in accordance with the terms of the plan

Timeliness of deferrals and lack of reconciliation of deferrals withheld and deposits into the plan

Actuarial census errors/outdated information

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Best Practices to Avoid Audit Pitfalls

Know who is a fiduciary and what their roles are - DOCUMENT

Know your fiduciary responsibilities Know the essential elements of the plan - DOCUMENT

Read the plan document at least annually and anytime you are unsure about a provision in the plan document

Ensure that the recordkeeper, trust company, and staff working on the plan are all following written plan document

Conduct regular compliance reviews or audits of plan policies, procedures and operations

Review fidelity bond policy - DOCUMENT

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Employee contributions-must be deposited into the plan as soon as can be segregated from the company’s assets but no later than the 15th business day of the following month- This is not a safe harbor! DOCUMENT your policy!

When hiring a Service Provider, make sure that they are qualified (financial condition, experience with retirement plans of similar size, how many employee benefit plans)

DOCUMENT the hiring process and due diligence Identify parties in interest - DOCUMENT Review Plan for prohibited transactions - DOCUMENT Review Plan Expenses and DOCUMENT

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Monitor Service Provider Review service provider performance Read service agreement, if applicable Read any reports that they provide Review fees charged Ask about policies and practices Follow up on participant complaints Review of SAS 70 of recordkeeper and or custodian DOCUMENT

Review Plan investments and review investment policy statement and DOCUMENT

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Hold regular meetings with the Retirement Plan committee or investment committee or those charged with plan governance and DOCUMENT

DOCUMENT, DOCUMENT, DOCUMENT!!!!!!!!

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Tools Available to Assist

Employee Benefit Plan Audit Quality Center

Website: www.aicpa.org/ebpaqc

• Includes Plan Advisories for communication and research on plan responsibilities

• Includes tools for Plan Sponsors

Your Third Party Provider

www.dol.gov

Employee Benefits Security AdministrationOffice of the Chief Accountant: 202.693.8360

EFAST Help Line: 1.866.463.3278

Plan Sponsor Magazine

Profit Sharing Council of America (IPS)

Fiduciary Oversight:A Process & Approach to Best Practices

Presented By: Charles A. Bruder

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I may have violated the provisions of a company sponsored retirement plan…

what can I do?

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Fiduciary Duties and Corrective Action – A Practical Approach

• Several available options– Do nothing, and hope that the problem is not discovered– “Self correct” the potential fiduciary breach– Disclose the breach to the appropriate government

agency/program

• The key to addressing a breach of a fiduciary duty is identifying the available correction methods and determining the appropriate course of action

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The “Do Nothing” Approach

• Pros– No action or cost involved– Does not require disclosure to any government

agency/plan participant– May result in cost savings to the plan sponsor – Permits the plan sponsor to continue with its

current form of plan administration

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The “Do Nothing” Approach

• Cons– The “ticking time bomb”– Raises the potential costs associated with

corrective action– Failure to address a fiduciary breach may be a

further breach of fiduciary duty– Audit Lottery – Are you feeling lucky?

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Available Corrective Programs1. Employee Plans Compliance Resolution System

(“EPCRS”)

2. Voluntary Fiduciary Correction Program (“VFCP”)

3. Internal Revenue Service (“IRS”) Notice 2008-113

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Employee Plans Compliance Resolution System

• EPCRS contains three correction programs:– Self-Correction Program (SCP)– Voluntary Correction Program (VCP)– Audit Closing Agreement Program (Audit CAP)

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Qualification Failures• Plan Document Failure

– Plan provision (or absence of provision) that violates the Code

• Operational Failure– Plan document complies with the Code but plan

doesn’t operate in accordance with its provisions

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Principles and Correction Methods• Full correction required for all plan years• Acceptable correction methods & retroactive plan

amendments– Expanded definition of “reasonable and appropriate”

• Model correction methods provided in Appendices A & B of Rev. Proc. 2008-50

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SCP – Self Correction Program• No disclosure to IRS, no fee, no sanctions• Can only correct operational failures• Must have a favorable IRS Determination

Letter• Must have established practices &

procedures to assure ongoing compliance• Corrective action requires documentation

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Employee Plans ComplianceResolution System

SCP – Self Correction Program• Insignificant vs. significant failures

– Applicable corrective period – choosing the right one

– Factors in determining the type of failure which may be self-corrected

• What if the failure cannot be self-corrected?

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VCP – Voluntary Compliance Program• Single program and single-admission process• Submission procedures• Ends with a compliance statement – Don’t

need to sign statement• Determination Letter/Retroactive Plan

Amendment may result in Determination Letter if plan on-cycle

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SCP versus VCP• Distinction between insignificant and significant errors• List of Factors to Consider

– whether failure occurred during period of exam– % of assets/contributions involved– # of years involved– % of participants affected– % of participants who could have been affected– correction within reasonable period– reason for the failure

• Uncertainty for plan sponsor

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Rev. Proc. 2008-50: New Fee Schedule• VCP fee unchanged• Compliance fee for §401(a)(9) failures reduced to

$500• Fee for failure to amend for EGTRRA good-faith

amendments, §401(a)(9) interim amendments, and amendments required to implement optional law changes: flat $375

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Audit CAP• Higher sanction• Factors used in determining sanction:

– Practices in place to identify and prevent plan failures

– Steps taken to correct failures– Reason for the failures

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Employee Plans ComplianceResolution System

Audit CAP• Length of time that failures occurred• Number of NHCEs affected if plan is disqualified • Existence of a favorable Determination Letter• Whether the error involves a demographic failure• Whether the only failure is an employer eligibility

failure

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EPCRS – What is Not Covered• Form 5500 filing delinquencies

– DFVC Program

• Prohibited transactions• Funding deficiencies

– Certain limited relief available under the Worker, Retiree and Employer Recovery Act of 2008

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Voluntary Fiduciary Corrective Program• Corrective program sponsored by the U.S.

Department of Labor– Certain enumerated transactions which may be

corrected• Prohibited purchases• Sales and exchanges• Improper loans• Delinquent contributions• Improper plan expenditures

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Why VFCP?• Type of corrective action required• Avoidance of civil penalties imposed by the IRS• Obtain a DOL “no action” letter• Avoidance of the imposition of excise taxes if the

class exemption provisions are met• Processing/corrective costs• Forum shopping

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Voluntary Fiduciary Correction Program

VFCP – Class Exemptions • Six classes of prohibited transactions covered

– Failure to transmit contributions/loan payments in a timely manner

– Loans made to parties in interest– Sales of property with parties in interest– Sales of real property to a plan with a leaseback to the

employer– Purchase of an illiquid asset by a plan– Certain plan expense issues

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EPCRS or VFCP?

• Which program is appropriate for correction of a fiduciary breach?– Type of action (or inaction) which resulted in the

breach of fiduciary duty– Appropriate correction method

• Crossover issues

– Cost/benefit analysis– Processing time

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Code Section 409A• Although not technically a “fiduciary duty,” a

potential source of financial woe for an employer• Code section has broad application to a variety of

arrangements• IRS Notice 2008-113 provides a model correction

program– Expands the program established under IRS Notice

2007-100

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IRS Notice 2008-113

• Program scope– No relief for documentary compliance failures

• Includes required amendments

– Limited relief available for “insiders”– Applicable to “inadvertent and unintentional” errors– “Full” correction is required– Avoidance of excise taxes

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IRS Notice 2008-113Eligibility Provisions

• “Inadvertent and unintentional” operational errors– Impermissible payments made to an employee

• Demonstrable steps must be taken to avoid future errors

• Recipient’s income tax return for the year in which the error occurred cannot be under IRS audit

• The error has been fully corrected– IRS guidelines for full correction

• The company cannot be in financial distress– Significant risk of non-payment?

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IRS Notice 2008-113

Same Year Corrective Method• Early payments must be returned to the

company• Late payments must be to the employee

- Non-insiders may take up to 24 months from income tax return due date to repay

- Requires immediate and heavy financial need

• Interest payments may be required• Avoidance of Code Section 409A penalties

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IRS Notice 2008-113

Post Year Corrective Method• Non-insiders• Corrective methods are similar to the “same

year” correction guidelines• Employee may be required to make interest

payments• Avoidance of Code Section 409A penalties

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IRS Notice 2008-113

Other Key Features• Correction of impermissible stock right grants

– “Reset” feature

• Limited corrective opportunity for other operational errors– $16,500 ceiling in 2008

• Other corrections permitted but will not avoid the 20% excise tax

• Employer notice requirements

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Code Section 125 New Proposed Treasury Regulations

• Effective for plan years commencing on or after January 1, 2009

• Apply to all arrangements which qualify for beneficial income tax treatment under Code Section 125– Group Medical Insurance Plans (“Flex Plans”)– Premium Only Plans– Medical Flexible Spending Accounts– Dependant Care Flexible Spending Accounts

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Code Section 125 New Proposed Treasury Regulations

• Treasury Regulations clarify that Code Section 125 is the exclusive means under which nontaxable group health benefits may be provided to employees– If your company plans do not satisfy the provisions

of the new proposed Treasury Regulations, benefits paid under these plans will be taxable to the participants.

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Code Section 125 Proposed Treasury Regulations - What Has Changed?

Written Plan Requirement– Plans must include the following items:

• Specific details concerning all benefits available under the plan• Eligibility provisions for participation (employees only)• Rules governing benefits elections, maximum elective

contribution limits• Rules governing the irrevocability of elections• Details concerning employer contributions• Definition of plan year

– Plans must be operated in accordance with stated terms

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Code Section 125 Proposed Treasury Regulations - What Has Changed?

Nondiscrimination Testing Required– Cafeteria plans cannot discriminate in favor of

highly compensated employees– Similarly situated employees must have a uniform

opportunity to elect to receive benefits– Objective nondiscrimination testing formula is

provided in the Treasury Regulations– “Safe Harbor” for premium-only cafeteria plans

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Code Section 125 Proposed Treasury Regulations – What Should Employers Do?

• Treasury Regulations apply to plan years commencing on or after January 1, 2009

• Need to carefully review plan documents– Summary plan descriptions– Intranet/employee communications– Cafeteria plan forms brochures

• Amend plan documents currently (if necessary)• Create a compliance manual

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COBRA Subsidy - Notice Requirements

• By April 18, 2009, group health plans subject to COBRA must issue to “assistance eligible individuals” notice of the extended election period of COBRA coverage and the COBRA subsidy provisions.

– A model notice is to be issued by the Secretary of Labor by March 19, 2009.– 60 day election period

• The notice must include specific information including:– The forms necessary to establish eligibility for the premium reduction; – Contact information for the plan administrator regarding the premium

reduction;– A description of the extended election period;– A description of the individual’s obligation to notify the plan administrator of

eligibility for subsequent group health plan coverage; and– A description of the eligible individual’s right to a coverage.

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COBRA Subsidy -Notice Requirements

• Notices must be provided to assistance eligible individuals who became entitled to elect COBRA continuation coverage during the period September 1, 2008 through December 31, 2009

• Notice regarding the special election provisions must be provided to all persons who terminated employment (for reasons other than gross misconduct) from September 1, 2008 through December 31, 2009.

Question & Answer Session

Thank you for coming!Please fill out the evaluation forms and

return them outside the media room.

Fiduciary Oversight: Timely Topics for Employee Benefit Plan Sponsors

Documents

Transcript of Fiduciary Oversight: Timely Topics for Employee Benefit Plan Sponsors